The commitments are part of New York State Comptroller Thomas DiNapoli’s climate action plan to lower investment risks from climate change and help shift the pension fund to net-zero greenhouse gas emissions within the next 20 years.
“While climate change poses investment risks, it also creates opportunities for the state pension fund to invest in the companies and funds that are best positioned for the low-carbon future,” DiNapoli said in a statement. “The commitments we announced today aim to take advantage of the growth in climate investing and to strengthen our portfolio for the long-term.”
On the eve of President Joe Biden’s virtual climate change summit with approximately 40 other world leaders and the fifty-first anniversary of Earth Day, a new alliance of 160 financial institutions was formed to achieve net zero by 2050 or sooner.
The Glasgow Financial Alliance for Net Zero (GFANZ) consists of three separate groups representing different sectors of the financial universe — the Net Zero Banking Alliance (NZBA), comprising 43 banks from 23 countries including Bank of America, Citi and Morgan Stanley in the U.S.; the Net Zero Asset Managers Alliance of 87 firms, including BlackRock, Vanguard, Allianz Global Advisors, Invesco and State Street Global Advisors and Trillium Asset Management, which joined Wednesday; and the 37-member UN-Convened Net Zero Owners Alliance, which includes the David Rockefeller Fund and the California Public Employees’ Retirement System (CalPERS).
In places, BlackRock’s findings are redacted, so as not to show the size of particular holdings, but the conclusions are clear: after examining “divestment actions by hundreds of funds worldwide,” the BlackRock analysts concluded that the portfolios “experienced no negative financial impacts from divesting from fossil fuels. In fact, they found evidence of modest improvement in fund return.” The report’s executive summary states that “no investors found negative performance from divestment; rather, neutral to positive results.” In the conclusion to the report, the BlackRock team used a phrase beloved by investors: divested portfolios “outperformed their benchmarks.”
In a statement, the investment firm downplayed that language, saying, “BlackRock did not make a recommendation for TRS to divest from fossil fuel reserves. The research was meant to help TRS determine a path forward to meet their stated divestment goals.” But Tom Sanzillo—I.E.E.F.A.’s director of financial analysis, and a former New York State first deputy comptroller who oversaw a hundred-and-fifty-billion-dollar pension fund—said in an interview that BlackRock’s findings were clear. “Any investment fund looking to protect itself against losses from coal, oil, and gas companies now has the largest investment house in the world showing them why, how, and when to protect themselves, the economy, and the planet.” In short, the financial debate about divestment is as settled as the ethical one—you shouldn’t try to profit off the end of the world and, in any event, you won’t.
LAST YEAR’S clear spring skies foreshadowed it and the numbers bear it out: covid-19 lockdowns caused a sharp drop in emissions from burning fossil fuels, the largest such drop since the second world war. The latest data, published on March 3rd by the Global Carbon Project, an international consortium of climate researchers, puts industrial carbon-dioxide emissions produced in 2020 at 34bn tonnes, 2.6bn tonnes (7%) lower than in 2019.
Clearly, 2020 was an unusual year and emissions have already started to rebound. What is more, the drop came at a huge cost to economies and societies. Yet, in order to meet the Paris agreement’s goal of limiting global warming to between 1.5°C and 2°C above pre-industrial levels, more big cuts will be needed for the rest of the decade. “We need a cut in emissions of about the size of the fall [from the pandemic] every two years, but by completely different methods,” said Corinne Le Quéré, of the University of East Anglia, one of the lead researchers on the study.
The New York State Common Retirement Fund (Fund) has reached agreements with five major U.S. companies, including Domino’s Pizza Inc., to set targets to reduce their greenhouse gas emissions (GHG), adopt new energy efficiency measures and increase their use of renewable energy, New York State Comptroller Thomas P. DiNapoli, trustee of the Fund, announced today. In response to the agreements, the Fund withdrew the shareholder resolutions with the companies.
“More and more companies understand that addressing climate change, by reducing their carbon emissions, helps their long-term success and benefits investors,” DiNapoli said. “The transition to a low carbon future and meeting our country’s renewed commitment to the Paris Agreement present enormous opportunities for smart, sustainable investments. My thanks to these companies for recognizing their role in building a lower-carbon economy and their responsibility to shareholders’ concerns about climate risk.”
Author(s): Thomas DiNapoli
Publication Date: 4 March 2021
Publication Site: Office of the New York State Comptroller
At Tuesday’s confirmation hearing, Sen. Pat Toomey pressed Gary Gensler on the scope of the SEC’s authority to regulate politics. Let’s say “a publicly-traded company spends a financially insignificant amount of money on, let’s say, electricity,” Mr. Toomey proposed. “Is it material whether that electricity came from renewable sources or not?”
Mr. Gensler resisted answering, saying “it may not be material or it may be material.” This isn’t reassuring. The concept of materiality is crucial to securities regulation because it defines the transparency required for investors to make prudent decisions. The SEC is supposed to protect investors from fraud by making sure they have access to accurate information about a firm’s performance.
But progressives want to use the agency’s watchdog responsibilities as a guise to bend finance in service of unrelated political goals, like climate. Mr. Gensler seemed to reserve the right to impose such politicized disclosure requirements, even when the information is “financially insignificant.”
Race & Insurance — The insurance regulatory system, and insurance in general, reflects the society it protects. Through our special committee on race and insurance we will continue to ensure the availability and affordability of insurance products for persons of color and historically underrepresented groups and promote diversity and inclusion within our sector.
Climate Risk & Resiliency — The NAIC is committed to working with state, federal and international stakeholders to coordinate climate-related risk and resiliency assessments, disclosures, and evaluation initiatives so that each state has the information, policies, and tools that promote resiliency and ensure stable insurance markets for its citizens.
Should eco-conscious investors support a company that’s developing innovative solutions to climate change—even if that company is also a major polluter?
The market’s answer to this question has been a resounding “no,” as evidenced by the investment policies that exclude traditional oil producers from most so-called sustainable funds. But this stance eliminates some of the most prolific and influential producers of green innovation, including Exxon Mobil, BP, and Chevron, according to recent research by Harvard Business School Professor Lauren Cohen.
Faced with mounting concerns about climate change, oil companies are diversifying their businesses, putting money toward renewable energy sources and green technology. While sustainable funds shun fossil fuel producers, which contribute half of the world’s greenhouse gases, Cohen’s study suggests that these companies could also play a key role in stemming the damage.
Author(s): Kristen Senz
Publication Date: 16 February 2021
Publication Site: Harvard Business School Working Knowledge